Auto Insurance Commercials can be No Laughing Matter if You Don’t Know Better

Yes, you could be laughing at the hysterical commercial, think the
mascot is cute, or enjoy seeing a personality or band that you love in a
fun advertisement for auto insurance, but if you do not know the
intricacies of choosing the correct coverages in your auto insurance
policy, you can be crying in the end.

This is what the funny commercials do not tell you. Essentially, any
insurance company that’s going to save you money on your car insurance
may simply be selling you less insurance for less money. In New Jersey,
there are certain components of your automobile insurance policy that
you should certainly be aware of so that you can make the proper choices
for you and your family.

Specifically, the critical components of an automobile policy are
Personal Injury Protection (PIP), liability coverage-Bodily Injury,
liability coverage-Property Damage, Underinsurance Motorist (UIM),
Uninsured Motorist Coverage (UM), and the Verbal Threshold or Limitation
of Lawsuit Threshold. It is the choices that you make with regard to
each of these components that ultimately makes up your premium when
taking into account your driving history and the specific types of
vehicles that you drive. Whether you elect comprehensive coverage and
what deductible you choose also impacts your premiums. It’s a fairly
simple formula, but it is one that is rarely explained to the consumer
in an adequate way.

So, we are going to set out to demystify the components of automobile
coverage so that you can be properly equipped to not only evaluate your
current policy, but certainly make sure that if you switch insurance
companies, that you are getting the same or better coverage for less
money, as opposed to less coverage for less money.

The first component we will talk about is Personal Injury Protection
(PIP), and in the coming weeks, we will dissect each of the other
components so that you know what you’re getting when you purchase car
insurance.

Essentially according to the Automobile Insurance Cost Reduction Act (AICRA), N.J.S.A. 39:6A-1, et. seq.,
in the event of an accident, your own automobile insurance pays for
your own medical expenses if you are injured as a result of a car
accident. That means, if you are injured after getting involved in an
accident, and you need to see a physician or get a test done, your own
automobile insurance policy will process the payment if the treatment is
pre-authorized. Certainly, there are limitations on this based on
certain coverages you purchase. The standard amount is $250,000 per
person per accident for anyone injured in the automobile accident in
your household. However, many times insurance companies will try to
drastically lower your premiums by selling you less coverage stepping it
down to $125,000, $50,000, and even as low as $15,000. In our practice,
we have unfortunately seen too many people opt for the $15,000 PIP
option, and when they do get injured, they are stunned to know the
$15,000 worth of PIP coverage is hardly enough to properly seek
treatment and diagnostic testing. After these sums are exhausted, the
individual is left to have to pay these bills out of his or her own
pocket or seek another source such as health insurance. Many physicians
will not treat a patient if they are not assured that there is a source
for payment.

This
brings me to the next and perhaps largest “switch” that the automobile
insurance companies try to push on their customers. Many times insurance
carriers will try to have you choose “Health Insurance Primary” option
which essentially means that your health insurance will be your primary
medical coverage if you are involved in an accident. Think about it: the
insurance companies pay a lot of money with regard to medical bills and
diagnostic testing on behalf of their insureds who are injured in car
accidents. If they can get their customers to choose that the customer’s
health insurance will be the primary coverage for post-accident medical
expenses, then in most cases, the automobile insurance company will
save a significant amount of money. What the insurance companies do not
tell you, is that if you do have health insurance and it is established
pursuant to Employee Retirement Income Security Act of 1974 (ERISA),
then the health insurance carrier has a right to be reimbursed for the
money that it spent for your medical treatment. This essentially means
that before you ever see a dollar of your recovery as a result of a
personal injury lawsuit, you will have to pay the health insurance
company back the amount that they paid for your medical bills. This is
called a “Health Insurance Lien.” This is startling to many people who
are always surprised and somewhat disappointed that their net recovery
is substantially reduced due to this option.

Ultimately, automobile insurance companies have different methods in
which they can get a consumer to choose less coverage to make it look
like they are saving the customer money when in reality they are just
simply giving the customer less insurance.

Stay with us in the upcoming weeks as we continue to flush out the
different ways insurance companies manipulate the components of your
automobile insurance policy in order to make you think that they are
saving you money when they are simply just giving you less.

[*All materials have been prepared for general
information purposes only to permit you to learn more about our firm,
our services and the experience of our attorneys. The information
presented is not legal advice, is not to be acted on as such, may not be
current and is subject to change without notice.]